Economics of Energy

Time and Fortune magazines

2008-4-3

Jeremy
Leggett is the chairman of Solarcentury, the U.K.´s largest
construction-integrated solar solutions company. He is also the chairman of
SolarAid and director at Bank Sarasin´s New Energies Invest—the world’s first
private equity renewable energy fund—and the author of The Carbon War and
Half Gone.

Why do
we need to reduce our use of fossil fuels?

Renewable
and efficient energy technology will have to replace fossil fuels far faster
than most people currently anticipate. The reason is the combined impact of two
key problems that will shape the 21st century: peak oil and climate change. A
premature topping point in global oil production would wipe out economic plans
currently on offer in boardrooms and finance ministries around the world. This
is because such plans assume growing supplies of affordable oil for several
decades to come. But as former U.S. Energy Secretary James Schlesinger recently
concluded, “we can’t continue to make supply meet demand much longer. It’s no
longer the case that we have a few voices crying in the wilderness. The battle
is over. The peakists have won.”

Among the
main escape clauses for peaking oil supply, according to traditional energy
experts, are the mining of Canada’s vast tar sand deposits, and
coal-to-liquids technology. Using the tar sands would require massive amounts
of water and gas. Coal-to-liquids technology is similarly greenhouse-gas
profligate, though here—as with regular coal burning—advocates hold up the
prospect of carbon capture and storage, where emissions are buried underground.
Of this prospect Schlesinger has concluded that, “it will take at least 15 to
20 years to introduce, if then.”

But
according to NASA’s top climatologist, we have less than a decade to deeply cut
emissions. If we don’t, we risk climate horrors such as an irreversible melting
of the Greenland ice sheet, which would lock-in a
global sea level rise of up to 23 ft. (7 m).

Here there
is good and bad news. Yes, we can run the world on renewables and efficiency.
Any self-respecting solar energy company—hooked up with the right partners—can
put up zero carbon buildings in a matter of weeks. Around 50% of CO2 emissions
come from buildings, directly or indirectly. Meanwhile, as traditional power
prices soar, solar manufacturing costs are falling.

But solar
is no panacea. We need an explosive growth in all renewable and efficient
energy markets. In Britain, for example, we have the potential
to source all of our primary energy from wind and marine technologies. Knowing
what the renewables family can do, imagine the frustration that practitioners
like me feel having watched these technologies held back during the great
addiction to fossil fuels.

What will
happen if the world doesn’t embrace renewable energy?

The bad
news is that no combination of technologies can plug the energy gap if the
peakists are correct. There will be a third, and last, global energy crisis. It
will dwarf previous crises. Profound economic dislocation will result. The
challenge for human civilization will be how we rebuild post-peak. If we
mobilize with renewables and efficiency, as though for war, we have the
potential to achieve a renaissance on many fronts. If we forget climate change
and go for coal and tar sands, we will achieve the opposite. A few hundred
billion tons of coal and tar sand could cause economically ruinous, and
irreversible, climatic impacts. That would amount to a fraction of remaining
coal and tar sand deposits, even if the experts have overestimated those
“resources” the same way they have conventional oil.